Category: Management

Right before lunch, one of my colleagues pointed out that Michael Zuckerberg, the CEO and founder of FaceBook (or the biggest rival of Bill Gates when it comes to stealing ideas!) is just 23 years old and Harvard University dropout. Right then another guy stated – “All university dropouts become rich!” Thats what sweeping generalization is all about.  I heard it for the first time when I read Edward DeBono’s , “How to have a Beautiful Mind“. These are statements in which there seems to be sufficient evidence offered to draw a conclusion, but the conclusion drawn far exceeds what the evidence supports. While it true that many rich and famous people are university dropouts but it never implies that all university dropouts make it big. Take another example, if you have worked with 2 outsourcing companies and got your fingers burnt , does it conclude that all software companies in India are bad? There is a lot of evidence that most terrorists are from Islamic nations, does it mean that all Islamic nations are terrorists? The conclusion drawn is just too exaggerating based on the evidence used. We come across these statement everyday in our lives and as managers its very important for us to understand its implications. Sweeping Generalizations are far too common and they disable open-minded thinking which is important for decision making.

Which do you prefer most – Microsoft or Opensource?  As educated, rational and data-driven people, we take pride in our ability to think logically or atleast believe that our decisions are based on sound judgment. I am currently reading Malcolm Gladwell’s , Blink , which talks about the Warren Harding error. This error refers to America’s 29th president, a man so distinguished-looking that once, at a banquet, a supporter cried out, “Why, the SOB looks like a senator!” Though he radiated presidential charm, Harding was actually best at playing poker and golf, drinking and chasing women. Gladwell calls him one of the worst presidents in American history. This book is basically about snap judgments or rapid congnitions which the author refers to as “Thin Slicing” . He argues that our mind has a pattern seeking behavior, which allows our brain to get past any irrelevant stuff and “zero in” on the the stuff that really matters. This behavior has a dark side as it allows us to fall for a person’s mannerisms, appearances and this is when our rational brain succumbs to visual traps. Ram charan in his book, Know How also pointed out the potential problem of this “thin slicing”. He stated that leaders often try to look for pattern in things where none exists and this leads to erroneous judgement. This often to leads people to compare China of today to Japan of 80s or predict the success of a business or point at somebody and say – “he is going to make it big someday” In order to expose our unconscious biases towards things, psychologists at Harvard University came up with IAT. This is an acronym that stands for Implicit Association Test. IAT helps us examine two things, First, we might not always be willing to share our private attitudes with others. Second, we may not be aware of some of our own attitudes. Your results on the IAT may include both components of control and awareness. Here is what IAT has to say about this: Psychologists understand that people may not say what’s on their minds either because they are unwilling or because they are unable to do so. For example, if asked “How much do you smoke?” a smoker who smokes 4 packs a day may purposely report smoking only 2 packs a day because they are embarrassed to admit the correct number. Or, the smoker may simply not answer the question, regarding it as a private matter. (These are examples of being unwilling to report a known answer.) But it is also possible that a smoker who smokes 4 packs a day may report smoking only 2 packs because they honestly believe they only smoke about 2 packs a day. (Unknowingly giving an incorrect answer is sometimes called self-deception; this illustrates being unable to give the desired answer) So, what has IAT got to do with Microsoft vs. Opensource? The answer is – do you know if you actually have a bias towards either Microsoft or opensource? Well the take a test on Harvard website to find this out. The results may surprise you. Microsoft vs. Opensource is the current featured test on https://implicit.harvard.edu/implicit/

We often run into heated arguments within our office – some say Microsoft rules , other say Apple is the future. I try to refrain from the temptation. But, here is what I actually think: The first chapter in economics that I read, told me that Businesses makes good and services which is consumed by families, for which they have to pay businesses some money. On the other hand, families supply the resources (capital, labor) which is used businesses in return for which it has to pay interest and wages. This symbiotic relationship has existed from centuries. An extension of this logic suggests that Microsoft as an organization wants to be a company which decides how business makes money , whereas Apple wants to be a company that decides how people spend it. Thats the end of the story – The sooner we get it the better! iPod has given the greatest branding to Apple which is a consumer product whereas Windows & MsOffice (Arguably!) made MS into what it is today. I dont think Apple ever said they wanted to improve productivity or Microsoft ever said that they want to make fashionable gizmos for teens. The problem is that with excess cash and surplus managers, both of these companies sometime venture into each other domain which causes all the confusions.

Any of us who have ever placed a formal bid for a project must have come across absurd prices from competitors that defy common sense. After observing this for a while, it is typical that the organization leaves its own pricing principles and attempt to cut-down or increase its prices. So how should organizations price themselves? Economics tells us that prices are determined by the dynamic equilibrium of Demand and Supply so that at the equilibrium price the demand and the supply are equal to each other.  In simple English it means, if all you are not pricing high then all your employees should be working on paying projects and it you are pricing too high then you will not have paying projects. On the other hand, if you are unable to keep with the number of projects and the HR department has to work overtime then may be its time to increase your prices. But, the big fat books on Marketing tell us that pricing should be done based on the perceived value of goods or service and not on its actual value. Thus, even if it costs $250 to make an iPod, it can be sold at $600 and this is how business consultants can demand for such insane prices and we pay them gladly! The sad truth is that most of the time organizations don’t know how to price themselves. Too often prices are determined by the internal cost structures on the company or prevalent market prices rather than “value” or “demand-supply”. The most common logic is – “we will 4 months on the project and with 2 persons working on, it will cost us X amount of dollars so let’s quote 1.5X for the project” or, “every body is selling it at $400 – $500, lets price it within this range only” For an average organization that is locked in a bidding scenario, it the option to either under-price or over-price. Under-pricing is used either as an “account penetration” or “staying in business” strategy. Many times, companies under-price because they just don’t know what to quote. An organization whose sales people are busy placing 50 odd bids on places like Elance etc , really don’t have the time (or may be even the knowledge) to correctly evaluate each project. This is also true for organizations that has under-staffed its sales department. They bid low in order to get the job and within few weeks (or even days) or execution, they realize that the job cannot be completed within the price and they will have to accept losses on the project. In this case the organization simply decides to accept the loss and learn the lesson or it decides to throw in the towel. In former case, this still means that corners are cut, scope is reduced, quality is ignored and the customer suffers. This is because an under-bidding organization is more focused in minimizing its losses than satisfying its customers. Over-Pricing is the other side of the same coin. If a project is over-priced then there are only two possible outcomes i.e. either the organization will win the business or it will not win the business. If it is not winning the business then it will either adjust its prices or it will go out of business. However, winning an overpriced project poses its own set of problems.  How will the organization allocate budget for an overpriced project? If it expects Y% profit then allocation of (100-Y)% as the project’s budget will lead to excessive project budget which will give an false impression regarding the project’s team performance. On the other hand, if it decides to allocate the normal budget as project’s budget (given it knows what the normal budget is!) then it will lead to abnormal or excessive profits which will sooner or later drive more competition into business and create a pricing pressure. Thus, in order to sustain the business and maintain the “elegance”, a lot more thought needs to be given on pricing. It is very important to first determine and then monitor the parameters based on which you are deciding how to price yourself better. Please note that “Better” does not means “Higher”!